Maintain Buy and raise target price as multiple high-speed optical module growth engines continue
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Maintain Buy and raise target price as multiple high-speed optical module growth engines continue
Nomura maintains its Buy rating on Zhongji InnoLight and raises its target price to CNY1,375, believing that the 800G/1.6T upgrade cycle, commercialization of 2.4T and NPO products from 2027, and longer-term 3.2T/CPO opportunities will support strong FY26-28F growth.
- Target price raised from CNY1,325 to CNY1,375, implying approximately 52.4% upside from the current price of CNY902.01.
- Nomura raises its FY26-28F revenue forecasts by 2-5%, earnings forecasts by 4-10%, and gross margin assumptions by 1.5-3.1 percentage points.
- The company is expected to maintain a 30-35% global AIDC optical module share in FY26-28F, with its share of high-end products at 1.6T and above expected to exceed 40%.
- The H shares were listed on the Hong Kong Stock Exchange on July 30, 2026, raising approximately HKD53bn net, to be used for R&D, global capacity expansion and industry chain investments.
Report interpretation
Overview
This report covers Zhongji InnoLight. Its core conclusion is that the company’s technology and supply chain leadership in the high-end data center optical module market remain solid. Nomura believes that the recent share price pullback has not altered the fundamental growth drivers for FY26-28F: upgrades in 800G/1.6T and silicon photonics products, commercialization of 2.4T coherent-lite transceivers and NPO products from 2027, and longer-term expansion of the 3.2T, XPO and CPO markets.
Core views
The report maintains its Buy rating and raises the target price to CNY1,375. Nomura believes market concerns over intensifying competition and new entrants are excessive, as the 2.4T/3.2T/NPO/CPO roadmaps will further raise technical barriers. Supported by R&D investment, product development and supply chain management, the company is expected to maintain a 30-35% global AIDC optical module share in FY26-28F and a 40%+ share of 1.6T and above products.
Analysis framework
The report assesses the company’s growth and profitability from the perspectives of the product upgrade cycle, global data center optical module shipments, NPO/CPO technology roadmaps, upstream optical chip supply and demand, supply chain management, use of H-share proceeds and valuation multiples. The earnings forecast upgrades are mainly driven by strong demand for high-end products, expansion of 2.4T and NPO/CPO products, product mix improvements and gross margin expansion.
Methodology notes
21x FY27F EPS
The target price is based on 21x FY27F earnings per share of CNY65.47, with reference to the median valuation of Chinese A-share technology/electronic component companies in WIND; the previous assumption was 20x.
High-end optical module upgrade cycle
The report forecasts shipment volumes, penetration rates and company market shares for different technology nodes, including 800G, 1.6T, 2.4T, 3.2T, NPO and CPO, to support its revenue and margin assumptions.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Zhongji InnoLight 300308.SZCore covered company
- Strengths
- Leading high-end optical module technology, high share of 1.6T and above products, effective supply chain management, and H-share proceeds supporting R&D and capacity expansion.
- Weaknesses
- Highly dependent on demand for high-end data center and telecommunications optical modules, and exposed to upstream material price and supply constraints.
- Comparison
- Nomura believes its FY26-28F revenue and earnings forecasts are significantly above WIND consensus, mainly due to more optimistic assumptions for shipment volumes, ASP and gross margins.
- Risks
- Demand below expectations, intensifying competition, slower-than-expected product upgrades, and price wars affecting export customers.
- COHERENT CORP US.COHRIndustry chain-related company
- Strengths
- Related to the optical communications and optical chip supply chains.
- Weaknesses
- The report does not provide a rating or detailed fundamental analysis of the company.
- Comparison
- Mentioned only as an industry or supply chain-related company, not a core covered company.
- Risks
- No direct investment conclusion in this report.
- XPOTechnology roadmap concept
- Strengths
- XPO is listed as one of the longer-term optical interconnect expansion directions.
- Weaknesses
- Commercialization pace and scale remain at an early stage.
- Comparison
- Discussed alongside 3.2T and CPO as a long-term growth direction.
- Risks
- Technology maturity, customer adoption pace and supply chain challenges may affect implementation.
Key data
- RatingBuyBuy rating maintained.
- Target priceCNY1,375Raised from CNY1,325.
- Current priceCNY902.01As of 2026-07-31.
- Implied upside+52.4%Based on the target price and current price.
- FY26-28F revenue forecast adjustment+2-5%Reflecting demand for high-end optical modules and expansion of 2.4T and NPO/CPO businesses.
- FY26-28F earnings forecast adjustment+4-10%Driven by product upgrades and gross margin expansion.
- FY26-28F gross margin assumption adjustment+1.5-3.1 percentage pointsAffected by improvements in the product mix of 2.4T, NPO/CPO and silicon photonics products.
- Forecast global AIDC optical module share30-35%Nomura expects the company to maintain a leading share in FY26-28F.
- Net proceeds from H-share IPOApproximately HKD53bnIntended for R&D, global capacity expansion, strategic acquisitions and industry chain investments.
Impact & implications
If Nomura’s forecasts are realized, Zhongji InnoLight will continue to benefit from the AI data center optical interconnect upgrade cycle, with scope for upward revisions to revenue, earnings and gross margin. Proceeds from the H-share listing may also strengthen the company’s global capacity and advanced technology footprint, helping consolidate its leading position in the high-end optical module value chain.
Risks
- Demand for high-end optical modules in the data communications and telecommunications markets may be weaker than expected.
- Competition may intensify in the 400G, 800G or 1.6T optical module segments.
- Upgrades to products such as 3.2T, silicon photonics, NPO or CPO may be slower than expected.
- Escalating price wars may affect the company’s exports to global customers and profitability.
- Supply-demand and price volatility for upstream materials or components such as InP wafers and EML/CW lasers.
What to watch
- Realization of FY26-28F shipments of 800G and 1.6T optical modules.
- Commercialization progress of 2.4T coherent-lite transceivers and NPO products in 2027.
- Customer adoption and market expansion of 3.2T, XPO and CPO in 2028 and beyond.
- Whether the supply of high-end upstream optical chips eases as expected, and the impact of material price increases on gross margins.
- Execution of the plan to increase global capacity from approximately 40 million units to approximately 90 million units by 2029 following the H-share fundraising.